• Wondering whether Fastly at around US$18.63 is still offering value or if most of the opportunity is already priced in? This breakdown will help you frame the stock through a valuation lens.
• The share price has pulled back, with Fastly down 10.3% over the last week and 9.2% over the last month, even after a strong 82.8% year to date return and 130.6% return over the past year.
• These moves come as Fastly remains in focus for investors watching the broader software sector and reassessing risk after a long period of volatility. The recent performance profile, including a 4.1% return over three years and a 65.8% decline over five years, provides important context for thinking about what the current price might be implying.
• On Simply Wall St's 6 point valuation checklist, Fastly currently scores 3 out of 6. Next is a closer look at the different valuation approaches that sit behind that score, followed by a final section on another way to think about what the stock might be worth.

Approach 1: Fastly Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model takes projected future cash flows and discounts them back to today, aiming to estimate what the business might be worth right now based on those cash flows.

For Fastly, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flow projections. The latest twelve month Free Cash Flow is about US$55.9 million. Analysts have specific Free Cash Flow estimates out to 2028, with Simply Wall St extrapolating further years to build a ten year path, including a projected Free Cash Flow of US$321.4 million in 2035, all in US$ terms.

When all those projected cash flows are discounted back and combined with an assumed terminal value, the DCF output suggests an estimated intrinsic value of about US$23.49 per share, compared with a current share price of around US$18.63. That implies Fastly trades at roughly a 20.7% discount to this DCF estimate, which in this model indicates that the stock is undervalued.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Fastly is undervalued by 20.7%. Track this in your watchlist or portfolio, or discover 46 more high quality undervalued stocks.

Approach 2: Fastly Price vs Sales

For companies where earnings are limited or volatile, the Price to Sales, or P/S, ratio is often a useful way to compare what investors are paying for each dollar of revenue. It sidesteps short term noise in profits and focuses on the top line the business is generating.

Growth expectations and risk usually influence what looks like a normal P/S ratio. Higher expected growth or lower perceived risk can support a higher multiple, while slower expected growth or higher risk tends to justify a lower one.

Fastly currently trades on a P/S ratio of 4.47x. That sits above the broader IT industry average of 1.72x, but below the peer group average of 9.25x. Simply Wall St also calculates a proprietary “Fair Ratio” for Fastly of 3.26x, which is the P/S multiple that might be expected given factors such as its growth profile, industry, profit margin, market cap and risk characteristics.

This Fair Ratio aims to be more tailored than a simple comparison with peers or the industry, because it incorporates company specific traits rather than relying on broad group averages. Comparing Fastly’s current 4.47x P/S to the 3.26x Fair Ratio suggests the stock is trading above this estimate of fair value.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Fastly Narrative

Earlier it was mentioned that there is an even better way to understand valuation. On Simply Wall St you can use Narratives, which are short, clear stories that link your view of Fastly's business to explicit forecasts for revenue, earnings and margins, then to a fair value that you can compare with the current share price. They are easy to access via Fastly's Community page and update automatically when new earnings or news are added. Narratives can also differ widely. For example, one user centered on an AI and edge computing growth story previously framed Fastly around a US$4.97 fair value, while analyst style Narratives on the same page span from about US$7.00 at the cautious end through roughly US$24.11 and up to US$32.00 at the optimistic end. This gives you a clear range of perspectives to test your own decision on whether the current price looks high, low, or roughly in line with what you think the company is worth.

For Fastly, however, we will make it really easy for you with previews of two leading Fastly narratives:

Fair value in this analyst-style narrative: US$24.11 per share.

Implied discount to this fair value versus the last close of US$18.63: about 22.7% lower than the narrative fair value.

Revenue growth assumption in this narrative: 11.21% per year.

• Analysts frame the story around growth in higher-margin edge security and computing services, supported by cross-selling more products to existing customers.
• The narrative highlights a focus on larger enterprise customers, more international exposure and tighter cost control to support margin improvement over time.
• Key watchpoints include intense competition from large cloud providers, customer concentration, ongoing investment needs and regulatory complexity that could pressure margins and delay profitability.

Fair value in this community narrative: US$4.97 per share.

Implied premium to this fair value versus the last close of US$18.63: about 274.9% above the narrative fair value.

Revenue growth assumption in this narrative: 9.93% per year.

• The author focuses on how widely known stories can run ahead of fundamentals, using Fastly as an example of a stock where an AI and edge computing narrative could attract heavy interest.
• Fastly is described as a potential beneficiary of rising AI and edge computing usage, after already going through a prior boom and reset that cleared out shorter-term holders.
• The piece also flags broader macro and sector-level uncertainties, suggesting investors watch how widely the Fastly story spreads and how the stock trades around levels like US$19 rather than focusing on any single fair value estimate.

If you want to see how other investors are joining the debate, and where they think the story goes next, See what the community is saying about Fastly.

Do you think there's more to the story for Fastly? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.